STANDARD MOTOR PRODUCTS, INC. Q4 FY2024 earnings call

Overall, pleased with Q4 performance; top line grew, adjusted EPS up. Vehicle Control benefited from non-discretionary products and distributor inventory investment. Temperature Control strong due to non-discretionary and weather-dependent nature. Engineered Solutions saw softness but long-term potential. Nissens acquisition integration underway, targeting $8-12M cost synergies. Full-year net sales up 7.8%, excluding Nissens up 5.1%; gross margin 29.1%; SG&A adjusted for Nissens and DC start-up; dividend increased.

Vehicle Control: Q4 net sales $187.4M, up 4.9%; full-year up 3.3%. Adjusted EBITDA down in Q4 due to lower gross margin but higher sales volume. Temperature Control: Q4 net sales $58M, up 30%; full-year up 12.5% due to non-discretionary nature and favorable weather. Engineered Solutions: Q4 sales down 7.9% due to customer production slowdowns; full-year up 1% with new business wins. Nissens Automotive: Acquired Nov 1, added $35.7M net sales and $3.2M adjusted EBITDA in Q4; seasonal, expected to pick up in 2025 with mid-teens EBITDA.

2025 top line mid-teens growth, slight headwind from ACI sale and Engineered Solutions softness. Adjusted EBITDA 10%-11%, includes Nissens full year. Interest expense ~$32M, tax rate 27%, D&A $40-45M. Operating expenses ~$97-103M Qtrly. Tariffs not accounted for in 2025 outlook, plan to pass through costs.

Uncertainty related to tariffs impacting costs and pricing; volatility in Engineered Solutions due to cyclical end market nature.

Q: Could you talk about how you see the Nissens' contribution to your guided growth for '25? Are there synergies in the North American business from adding that product to the portfolio?

A: We expect some cost synergies to roll through, but revenue synergies will take longer. Timing lag exists with vendor lead times, but hope to see some towards end of 2025.

Q: Can you just talk about the sort of POS data at the customer level versus your sell-in? Obviously, a very strong Temperature Control. Is that product -- could you talk about customer inventory levels there? And do you see any of that being purchasing ahead of potential tariffs just given a lot of that product comes from Mexico? Or is it really sort of aligned with what the underlying demand is?

A: Vehicle control saw flat POS from big guys with sell-in slightly higher due to distributor inventory expansion. Temperature Control had strong sell-in with slight rebuild of inventory; not seeing pull forward of purchases ahead of tariffs as purchasing is rational.

Q: How do you see inflation ex tariffs? What would you sort of think same SKU inflation looks like in '25 versus '24?

A: Inflation across markets is back to normal sans tariffs; same SKU inflation expected in low single-digit range.

Q: Regarding tariffs, could you just remind us where your exposure versus all the regions are versus Mexico, Canada, China and Europe?

A: We are a global company with manufacturing across multiple continents; exposure throughout but not overly concentrated. Plan to pass through tariffs, with timing offset as tariffs are announced and worked through inventory.

Q: With the new addition of Nissens, maybe just go through the three individual segments; air conditioning, engine cooling and energy efficiency. Just remind us what each one is doing and how each is performing, I guess, from a sales perspective.

A: Engine cooling is largest, air conditioning second, engine efficiency newer. All performing well; air conditioning most seasonal. Nissens expanding subcategories and gaining scale in subsegments.

Q: I know you're opportunistic, but is it fair to say that at this point in time that you would not be too interested or aggressive in further acquisitions until you pay down some of your debt?

A: That's a fair assessment. Our intent is to pay down debt levels; near 3x pro forma today, expect to get to zero by end of '26. No immediate plans for further acquisitions.

Q: Could you describe how you're examining the potential efficiencies from artificial intelligence and perhaps who you're working with?

A: Looking at applications to make us more efficient, like predictive analytics in demand planning. Working with various third parties, but no specific ones to advertise.